– BPO/KPO Industry to consolidate: ASSOCHAM

Over the next five years the Indian BPO and KPO industry would see over 100 mergers and acquisitions and IPOs, Trade body Assocham today said.

The total deal could well be between $3-5 billion, it said in a paper jointly brought out by Assocham and Evalueserve.

According to the paper, out of the projected $3-5 billion value of transactions, large players will garner about 80 percent while the rest will go to the smaller companies covering about 400 companies. It also said most of the 20 mega deals, involving M&As and IPOs, would be undertaken only by a group of 10 large companies.

The paper also said that large companies would hive off their captive units while third party BPO companies will acquire smaller BPOs. Assocham said that small and medium-sized BPO vendors would witness considerable acquisition and funding activity in the short term, whereas larger vendors will look for opportunities to diversify.

Knowledge Process Outsourcing vendors will also experience similar activity in the long run and big players will lead major acquisitions. These players may consider the IPO option in order to raise capital for business expansion, either by organic or inorganic means. Market entry strategies, both in terms of geography and line of business, multi-location delivery capability, access to a low cost base, the acquisition of complimentary skills and capabilities, reduction in overall outsourcing complexity and financial motives, will be driving M&A and IPO activity in these domains.

The study has further said that the Indian BPO/KPO industry will also see consolidation and the likely creation of few listed global players.